Fake Apple Stores in China Sign of Heavy Demand for iPhone, iPad

China has always been known for counterfeiting high-end luxury brands. But not content to pirate software or copy phones, entrepreneurs have now cloned the entire Apple Store.

Chinese
officials closed two unauthorized Apple stores for operating without a proper
business license, according to news reports. However, three other fake Apple
stores were allowed to remain open because they had proper local permits.
As
part of a probe of more than 300 IT businesses, the Kunming
Trade and Industry Bureau identified five businesses that were using the
official Apple logo without "Apple's authorization," the government
agency said July 25. The stores were located in Kunming, the capital of the
Yunnan province in southwest China.

At
least one store mimicked the Apple decor, including the bright blue T-shirts
and white tags Apple employees wear, the bureau said. Authorities did not find
any counterfeit Apple hardware among the 12 computers and six mobile phones
sold in the fake Apple stores.

"There
is no Chinese law that says I can't decorate my shop the way I want to decorate
it," an employee at one of the fake stores told Reuters, noting that there
were no counterfeits being sold at the store.
Apple
has four authorized Apple Stores in China, two in Beijing and two in Shanghai,
but none in Kunming. The authorized stores are the four most heavily trafficked
Apple Stores in the world, according to Apple.
Calling
China a "well-known hotspot" for counterfeiting and piracy, there is
a "traditional lack" of intellectual property enforcement within the Chinese
business culture, Victor DeMarines, vice president of products at V.i. Labs,
told eWEEK. "The Apple Store case is a creative example," DeMarines
said.

The
presence of these fake stores highlights the intense demand for Apple products
in China. Only 53 percent of the 1.07 million Apple iPads sold in China last
quarter were through vendors sanctioned by Apple, according to research firm
Analysys International.
Smuggling
is also highly lucrative, as iPhones and iPads are illegally brought into China
from Hong Kong. The official price of an iPad 2 is HK$3,888 (about $499 USD) in
Hong Kong, compared to the official price of 3,688 yuan (about $572 USD) in
China, according to Reuters. Chinese black market retailers offer smuggled
devices priced somewhere between those two prices, Reuters reported.
"China
has taken rip-offs to a new level, pirating Apple Stores themselves,"
Charles Wolf, a securities analyst for Needham & Company said, adding,
"It speaks to the demand for Apple products throughout China."
Apple
reported July 19 that fiscal third-quarter sales in Greater China, the area
including the People's Republic of China, Hong Kong and Taiwan, were six times
greater than the same period a year ago. At $3.8 billion, revenue from Greater
China accounted for 13 percent of total income, Apple said.
Chinese
piracy and counterfeiting cost American businesses an estimated $48 billion in
2009, the U.S. International Trade Commission said in May.
A
Chinese government official said earlier in the month that piracy is not an
"extremely serious" problem, Reuters reported. After police shut down
12,854 illegal plants making pirated and counterfeit products in a nine-month
crackdown that began in late October, the situation has improved, said Jiang
Zengwei, vice minister of commerce, at a press conference.